Part of: GS Prelims and Mains II and III – International Relations; Defence
In news:
India and Russia concluded the contract for five S-400 ‘Triumf’ missile systems.
S-400 is a long range surface to air missile.
However, the two sides failed to conclude two other major deals, for stealth frigates and assault rifles.
Meanwhile, U.S. issued a statement warning that any waiver for the S-400 deal would be considered on only a “transaction-by-transaction basis.”
Other ties:
On education and people to people ties – Modi and Putin interacted with young talent drawn from India’s Atal Innovation Mission (AIM) and Russia’s SIRIUS educational centre.
An MoU was also signed between AIM and SIRIUS to further their cooperation. Indian and Russian students visit other countries and together must think what can they do to make lives simpler for people, especially the poorest, to improve their way of living.
Gorkhaland issue: Tripartite meeting soon
Part of: GS Prelims and Mains II and III – Centre and State Relations; Internal Security issues
In news:
The Centre has agreed for a tripartite meeting to discuss various political issues concerning the Gurkhas, including the demand for a separate State of Gorkhaland.
Large-scale violence was reported in Darjeeling in West Bengal and nearby areas controlled by the Gorkhaland Territorial Administration (GTA) in June last year.
Note:
Refer the below link to know about Gorkhaland movement, History of Gorkhaland movement, Timeline of the Gorkhaland crisis, Why Gorkhaland Movement Matters? Pros and Cons etc.
Frances H Arnold, George P Smith and Gregory P Winter win Nobel prize in chemistry.
Briton and two Americans honoured for using evolutionary principles to develop proteins that have been used in new drugs and medical treatments.
Three scientists won the Nobel Physics Prize for inventing optical lasers that have paved the way for advanced precision instruments used in corrective eye surgery.
Arthur Ashkin of the U.S., Gerard Mourou of France and Donna Strickland of Canada
United Nations Environment Programme honoured PM Modi with United Nation’s Top Environmental Award – Champions of the Earth.
ICMR confirms Canine Distemper Virus killed Gir animals
Part of: GS Prelims and Mains III – Animal conservation; Biodiversity
In news:
Indian Council for Medical Research (ICMR) has confirmed that the Canine Distemper Virus (CDV) was responsible for lion deaths in the Gir forest of Gujarat
It recommended that the remaining lions be vaccinated to prevent further outbreaks.
Do you know?
Fast recap:
IUCN Status: Endangered
The lion is one of five pantherine cats inhabiting India, along with the Bengal tiger, Indian leopard, snow leopard and clouded leopard.
It was also known as “Indian lion” and “Persian lion”.
River under threat: Musi River
Part of: GS Prelims and Mains I and III – Geography, Environment conservation; Biodiversity; Pollution
In news:
Musi River – is a tributary of the Krishna River in the Deccan Plateau flowing through Telangana state in India.
Due to indiscriminate urbanization and lack of planning, the river has become a receptacle of untreated domestic and industrial waste dumping out of Hyderabad.
The river water downstream of the cities remains highly polluted, considered a major disaster in Hyderabad.
Miscellaneous
India’s first methanol cooking fuel debuts. Pilot project by the Namrup-based Assam Petrochemicals Limited (APL), India’s first public sector producer of methanol and formalin from natural gas as feedstock.
(MAINS FOCUS)
ECONOMY
TOPIC: General Studies 3
Indian Economy and issues relating to mobilization of resources, growth, development
Avoiding the currency basket case
Introduction
The current global events have affected rupee value negatively, which started a debate on internationalisation of rupee.
The Indian rupee was once a multilateral currency, its usage prevalent across the Indian Ocean in places as varied as Java, Borneo, Macau, Muscat, Basra and Zanzibar.
The historic dhow trade ensured that the Gulf had a familiarity with the rupee for over five centuries, with Oman utilising the ‘Gulf rupee’ till 1970.
Colonial rupee
The accession of George V to the throne in 1911, enshrining his rule of the British Raj, led to the issuance of a new rupee coin.
The colonial rupee leveraged the Mughal rupee’s popularity, facilitated by trading communities, migration and the Raj’s hegemony.
The annexation of Sindh, Ceylon and Burma further encouraged the primacy of the rupee in these areas.
A number of Indian merchant communities had established themselves in such regions, aiding in its convertibility.
After independence
Even after Independence, Dubai and other Gulf states were using RBI-minted Gulf rupees until 1966.
Between the 1950s and 1970s, gold smuggling was rampant on the Konkan coast, with a number of Gulf businesses buying gold cheaper in the Gulf in rupees and smuggling it to India.
Only the devaluation of the Indian rupee in 1966, after the 1965 war, led to such nations switching to their own currencies.
Now, only Nepal and Bhutan regularly conduct bilateral trade with India in rupees.
Rupee’s Valuation and its reasons
The value of the rupee itself has varied over the years too, the rupee was never equal to the U.S. dollar.
In 1947, the rupee-dollar rate was at Rs. 3.30. The aforementioned devaluation in 1966 raised it to Rs. 7.50, reaching Rs. 32.4 by 1995.
This decline was precipitated by a variety of factors – wars with Pakistan and China, the adoption of Five Year Plans requiring foreign loans, political instability and the Oil Price Shock of 1973.
Of late, the rupee has been declining given higher oil prices and FII outflows from stocks and bonds.
The ongoing U.S.-China trade war, Iran sanctions and further upward movement in oil prices will continue to test the rupee’s valuation.
Somehow, the rupee always ends up falling just prior to an election – data showes that rupee had depreciated just prior to the election date six times in the past seven elections.
What can be done to control rupee value?
In situations, the Reserve Bank of India and the Ministry of Finance do have a number of options for stabilisation, including overtly intervening in the forex market, selling non-resident Indian bonds and conducting a sovereign bond issuance.
To reduce the rupee’s dependency on the U.S. dollar, India should consider formalising the rupee payment mechanism with friendly countries such as Russia, with a focus on reducing its overall current account deficit.
We must continue to guard against fiscal profligacy(reckless extravagance), with any slippage viewed negatively by the currency markets, further encouraging investors to flee Indian markets.
Industrial growth should be a priority; without having goods to sell, rupee swaps (say with Iran) will be difficult to institutionalise.
A lower rupee is a recipe for a higher import burden, spiralling eventually into a currency crisis.
Black money strategy
India’s black money strategy should consider four pillars — it should encourage tax rate rationalisation, reform vulnerable sectors, support a cashless economy and create effective and credible deterrence.
Tax rate rationalisation, with lower tax rates as an end goal, would increase the tax base and increase compliance with tax returns.
Administrative agreements with countries like the U.K. and Switzerland which can offer mutual tax sharing should be encouraged.
It is important to create a remittance database detailing company transfers out and NGO transfers into India, all reporting to the Financial Intelligence Unit (FIU).
The Direct Tax Administration’s Directorate of Criminal Investigation should be provided the right IT training, infrastructure and funding to become an effective deterrent.
The audit cycles for income tax, service tax and excise tax departments should be aligned, helping the Large Taxpayer Unit (LTU) become more effective, increasing the scope of simultaneous scrutiny and examination.
Internationalisation of rupee
Finally, the internationalisation of the rupee is a worthwhile goal to aim for.
While the Chinese yuan is increasingly being positioned for an alternative reserve currency through a variety of multilateral trades, institutions (the Belt and Road Initiative, the Asian Infrastructure Investment Bank) and swaps, the Indian rupee remains woefully behind in internalisation.
China campaigned hard for the inclusion of its currency in IMF’s benchmark currency basket in 2015, introducing a range of reforms to ensure that the yuan was considered as “freely usable”.
The RBI, meanwhile, has adopted a gradualist approach – allowing companies to raise rupee debt offshore, enabling the creation of “masala bonds” and allowing foreigners to invest in rupee debt onshore.
Conclusion
The rupee has transformed from a largely non-convertible pegged currency before 1991 to a managed float.
The rupee is currently not even in the top 10 traded currencies.
There is no magic wand to making the rupee appreciate. But institutional resistance against rupee convertibility should be overturned.
To restore the rupee’s multilateral nature, we must unshackle its usage.
Connecting the dots:
What is SDR basket? What are the potential benefits for India if rupee gets a place in SDR basket?
INTERNATIONAL
TOPIC: General Studies 2
Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora
Important International institutions, agencies and fora; their structure, mandate
Eyes on India
Introduction
Asia is in a state of flux.
China’s Belt and Road Initiative is reshaping the region’s geography, with roads and railways traversing Eurasia and new ports dotting the Indian Ocean basin.
Beijing’s militarisation of the South China Sea continues, despite negotiations towards a code of conduct.
Recent developments
Japan has found itself in an unexpected leadership position, reviving the Trans-Pacific Partnership and concluding a trade agreement with the European Union.
Tokyo is now contemplating constitutional revisions that would enable it to play a more overt military role.
Amid these unfolding events, another series of developments risks being overshadowed.
Japan, South Korea, Taiwan, and Australia have all unveiled strategies to diversify their economic interdependence, away from mainland China and towards Southeast Asia and India.
Why eyes on India?
The most recent reason is the on-going trade and tariff war between the U.S. and China.
A longer-term concern is Beijing’s use of its economic muscle for political purposes, whether in suspending rare earth metal exports to Japan in 2010 or punishing a major South Korean corporation for Seoul’s decision to install a missile defence system in 2017.
China’s limited market growth potential and questions of access and reciprocity are additional considerations.
Approach towards India
Japan’s Free and Open Indo-Pacific strategy is meant to diversify investments to more promising markets in Southeast Asia, India, and Africa.
South Korean President Moon Jae-in has unveiled a New Southern Policy. Mr. Moon said that while the policy is focussed on Southeast Asia, it also “makes India Korea’s key partner for cooperation”.
Similarly, Taiwan, a G20-sized economy whose political status is disputed, has announced a New Southbound Policy with significant accompanying investments in India by Taiwanese electronics manufacturers.
Finally, Australia’s government has commissioned an ambitious India Economic Strategy with the goal of making India its third-largest investment destination and export destination by 2035.
Conclusion
While not driven by short-term necessities, political concerns are increasingly informing economic preferences.
Politically, therefore, the stars are aligning in Asia for the acceleration of India’s economic growth.
Investors, increasingly backed by their governments, are increasingly focussed on the Indian market.
But with more protectionist sentiments taking root, a legacy of poorly-negotiated trade deals, a general election around the corner, and uneven economic liberalisation, the likelihood of India taking full advantage of these opportunities remains slim.
Connecting the dots:
Japan, South Korea, Taiwan and Australia have unveiled strategies to forge closer economic ties with India. Do you think that China’s growing assertiveness has become a blessing in disguise for India? Critically comment.
(TEST YOUR KNOWLEDGE)
Model questions: (You can now post your answers in comment section)
Note:
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Q.1) Consider the following pairs and select the correct pair/s from the code below:
Award : : Person associated with it
Nobel prize in chemistry for 2018 : : Denis Mukwege and Nadia Murad
Nobel Physics Prize for 2018 : : Frances H Arnold, George P Smith and Gregory P Winter
Nobel Peace Prize for 2018 : : Arthur Ashkin and Donna Strickland
Code:
3 only
2 only
1 and 2 only
None
Q.2) Consider the following statements about Atal Tinkering Laboratories (ATLs):
It is part of Atal Innovation Mission (AIM)
Mentor India Campaign will engage leaders who can guide and mentor students at Atal Tinkering Labs
ATLs can be established in schools (Grade VI – XII) managed by Government, local body or private trusts/society.
Select the correct statements
1 and 2
2 and 3
1 and 3
All of the above
Q.3) Which of the following is under the aegis of NITI Aayog?
